Chapter 4 Flashcards
Analysis of Macroenvironment
Macroenvironmental forces affect industries and individual firms within industries. The focus at this stage of analysis is on the industry, not the firm.
Certain forces may be more prominent in some industries than in others.
Social Forces
Societal values Trends Traditions Religious practices Concern for the environment Societal values refer to concepts and beliefs that members of a society tend to hold in high esteem.
Social Forces- Eating Habits
Consumers “super size” at record rates while demanding healthier foods.
Many fast food restaurants have been “supersizing” their meal combinations by adding extra fries and larger drinks, while at the same time expanding alternatives for items such as grilled chicken sandwiches and salads
Social Forces-Automobiles
Contrary to demand patterns in other parts of the world, demand for large vehicles remains strong in the U.S. amidst cries for greater fuel economy.
Global Concerns
Firms operating in multiple countries must address multiple sets of social forces.
Social forces are influenced by national culture, the generally accepted values, traditions, and patterns of behavior in a society. Firms should recognize these cultural differences.
Some firms struggle because their managers consciously refer to their own cultural values as a standard of judgment, a phenomenon known as the self-reference criterion.
Self-Reference Criterion
The unconscious reference to one’s own cultural values as a standard of judgment. Individuals, regardless of culture, become so accustomed to their own ways of looking at the world that they often cannot comprehend any significant deviation from their perspective.
Social Forces and external environment
Social forces are often intertwined with forces in other areas of the external environment. For example, the global recession of the late 2000s and early 2010s—and economic force— has spawned a greater emphasis on frugality.
A number of consumer-related trends have been sparked by development of the Internet. Going viral is good but a poor review going viral is bad.
Traditional retailers have struggled to keep pace with online rivals- which have lower overhead costs and therefore lower product costs.
Physical stores need entertainment value
Technological Forces
Scientific improvements & innovations
The Internet is arguably the most pervasive technological force affecting most industries.
The world is flat
During the dot-com bubble of the late 1990s, telecommunications firms laid fiber optic cables across the oceans to connect the U.S. with China and India. Since the dot-com bust, these cables have provided high quality, low cost contact with developing nations, “leveling the playing field.”
“Any activity that can be digitized and moved around will get moved around.”
Strategy and the Internet
Has the Internet created new business models or just altered the old ones?
Although the Internet plays a substantial role, critics challenge the notion that “new business models” are needed to compete in the “new economy.” Michael Porter and others argue that the market forces that governed the traditional economy have not disappeared in the Internet economy.
Technological adoption
Technological change can decimate existing businesses and even entire industries because it shifts demand from one product to another.
Once commercialized, advances in technology can quickly become dated, however. Many firms struggle when it comes to applying new technology to their existing business models.
Costs typically decline as technology advances
Technology and global advancement
Technology’s influence on global business can also be viewed from a development perspective. For years, manufacturers in technologically advanced nations established operations in developing countries with low labor and/or raw material costs. These expansions have generally been welcomed because they bring financial resources, opportunities for workforce training and development, and the chance for the host country to acquire new technologies. However, leaders in emerging nations are not always satisfied with the results of global business expansion because anticipated economic and social benefits do not always materialize.
Disaggregation and Reaggregation
Large firms exist because they can perform most tasks—raw material procurement, production, human resource management, sales, and so forth—more efficiently than they would otherwise be performed if they were “outsourced” to the open market.
Today, many progressive firms have “disaggregated” by no longer perform all of their functional activities, but instead “reaggregate” by searching for partners who can perform some of the activities more efficiently.
Outsourcing vs Partnering
Outsourcing refers to specific agreements associated with a single task, partnering implies a longer-term commitment associated with more complex activities. In many respects, a partner can be viewed as an extension of the organization. Partner capabilities and limitations are fast becoming as important as internal strengths and weaknesses.
Strategic dimensions of the internet (5)
The expansion of the Internet has changed how strategic managers assess their environments and ultimately make strategic decisions.
Contrary to early expectations, the Internet has not always generated greater profits for businesses. Consumers have benefitted immensely.
Five key interrelated strategic factors: (1) movement toward information symmetry, (2) the Internet as distribution channel, (3) speed, (4) interactivity, and (5) the potential for cost reductions and cost shifting.
